The ripple effect of increasing the minimum wage has meant some employees already receiving $20 per hour are now also expecting a pay rise, business leaders say.
Meanwhile, business owners already struggling post-lockdown may have to reduce hours, cut jobs, and pass extra costs on to clients.
The adult minimumwage increased to $20 from $18.90 per hour on April 1, 2021. The starting-out and training minimum wage rates have also increased to $16 from $15.12 per hour.
The Ministry of Business, Innovation and Employment said about 12,300 Bay of Plenty workers were impacted by the minimum wage rise - about 9.7 per cent of the region's employees.
According to MBIE, the pay rise meant a full-time employee working 40 hours a week on the previous $18.90 per hour minimum wage would receive an extra $35.69 per week after taxes.
Retail NZ's latest Retail Radar report revealed two-thirds of retailers nationwide said the minimum wage increases will impact their businesses.
The report showed 37 per cent of retailers would be less able to reward employee performance, 34 per cent would decrease the number of hours of work they offer employees - and 30 per cent were expecting to decrease the number of people they employ over the next three months.
Retailers also reported price increases and reduced ability to hire unskilled staff, and many will be making commensurate (in proportion) wage increases to staff not on the minimum wage to ensure the increases were fair.
Retail NZ chief executive Greg Harford said small businesses owners struggling to pay themselves the minimum wage needed to take steps to manage cost increases.
Tauranga Chamber of Commerce chief executive Matt Cowley said employees already earning above $20 per hour were now asking for more money as they were getting paid the same as minimum wage.
"Many owner-operators who operate in a low margin environment will review their staff resourcing, and some will decide to draw themselves back into operational tasks.
Tauranga Chamber of Commerce chief executive Matt Cowley. Photo / File
"This isn't great for business owners as Covid-19 proved that business owners need to be thinking more strategically about their business."
But Cowley said labour shortages were a bigger issue and businesses were likely to invest more into technology that replaced low-skilled jobs as costs kept rising.
"The businesses most impacted by the government's closed borders will also be the most sensitive to rising minimum wage increases."
Priority One chief executive Nigel Tutt said the minimum wage increase was one of several additional costs for businesses in recent times, including additional holidays, sick leave, and rates.
"Most businesses will seek to pass additional costs on to their clients; where they are unable to they may reduce staff or hours."
Priority One chief executive Nigel Tutt. Photo / File
Hospitality New Zealand Bay of Plenty regional manager Alan Sciascia said many businesses had gone into debt to keep operating after an "extremely difficult year" and now they were incurring extra wage costs and staff expectation of also receiving a commensurate increase.
"Customers should expect to pay more when businesses incur additional operating costs."
Hospitality New Zealand Bay of Plenty regional manager Alan Sciascia. Photo / Supplied
Holland Beckett Law partner Christie McGregor said the challenge for employers was ensuring parity for lower-paid or junior staff.
"In our experience, overwhelmingly employers do want to do the right thing and ensure their employees are fairly paid. Ultimately costs that cannot be absorbed would need to be passed on to the consumer."
E tū and the Council of Trade Unions both commended the minimum wage rise and hoped it will continue to increase yearly to help lift more New Zealanders out of poverty wages.
Prime Minister Jacinda Ardern announced the minimum wage increase last month and said it represented "real and long overdue changes".
'Our staff really deserve it'
Watchdog Security Group chief executive officer Brett Wilson said the majority of his staff in Rotorua and Tauranga will be receiving a pay rise.
"It's about maintaining parity ... There is an expectation. In our industry, it is a tough job and getting tougher. Our staff really deserve it (pay rise)."
However, Wilson said the timing was "not quite right" post-lockdown and the extra costs would naturally fall on the clients.
Fresh Choice Omokoroa owner Steve Ling said there were also increases to the cost of fuel, transport, retail, power, insurance, etc.
"Everyone puts the costs up accordingly. In summary, our wage bills have gone up significantly since April 1.
"We think it's got to be fair."
Q&A with an employment lawyer
Q. What types of minimum wages rates are there and who is entitled to the increases?
Holland Beckett Law partner Christie McGregor. Photo / File
A. There are three types of minimum rates that are impacted:
Starting-out rates of wages – these can be paid to workers who:
Are aged 16-19; and Are not involved in supervising or training other workers; and Have been employed for less than 6 months.
Training rate wages – these can be paid to workers who are:
Aged 20 years or older; and Are not involved in supervising or training other workers; and Are employed under contracts that require them to undergo training, instruction, or examination for the purposes of becoming qualified in that employment.
The starting-out and training wage cannot be less than 80 per cent of the minimum adult rate.
Q. What are employers' main concerns with increasing the minimum wage?
A. There is definitely an impact in trying to maintain relativities for staff in lower-paid industries. Where minimum pay increases, there can be pressure on employers to differentiate between rates of pay and this can impact on the ability to provide more to high performers if the bar is higher to begin with.
Attempting to reduce hours for staff may not be the best way to approach this issue, and could present other problems for employers where discretion to change hours is not contained in the relevant employees' employment agreements.
It may be that the resulting impact could also be less work offered to casual workers, or restructuring to reduce staffing costs.
Q. What do employers need to be wary of?
A. Employers will need to be wary that salaried employees are receiving their minimum wage entitlement based on hours worked.
This is particularly so for lower-paid salaried employees where an expectation of working extra hours at no additional pay exists.
Care should be taken to ensure salaries anticipate total hours worked, and meet at least minimum wage requirements (for example an employee who works a 60 hour week, but their salary is set based on a 37.5 hour week, may end up being underpaid based on minimum wage requirements).
